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    Default Finances and Budgeting

    I've been watching Til Debt Do Us Part for almost a year now. I bought Dave Ramsey's Total Money Makeover in December. I'm using some of the information from both financial experts to try to get everything paid off.

    When I set up my budget using my January 31st paycheck, I looked back on six months' worth of finances and tried to take the average. Then I set some not-so-realistic goals to cut back in certain areas (meals out).

    This has been a crazy month! Both vehicles needed repairs, smogged, and registered. Thus, I am considerably over-budget for the month. Which, for DR means back to Baby Step 1.

    I'm about to start month 3. But I have some questions/issues that perhaps we can debate.

    1. If I continue to go over-budget in one area, when should I adjust the budget?

    2. On variable expenses such as utilities, if I budget X and the amount is less than X, what do I do with the extra? Do I continue to carry over X as the monthly budget?

    3. If I buy a gift card when do I record it and where? When I buy it under the gifts category or when I use it under the category it was used in?

    4. I won't switch to cash only. Would it make sense to buy gift cards at the beginning of the month, so it's not cash, but not debit? I know where I will buy gas and groceries so that would be closer to cash than using debit.

    As a side note: How long do you deduct outstanding checks from your checking account? I have two from last September than never cleared.

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    Posting Addict TyrantOfTheWeek's Avatar
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    We do DR. We usually only use our debit card for gas. Everything (about 95% )else is cash. Most of our bills are on autodraft. And we paid off our pretty small home improvement loan with our tax refund. I like your gift card idea if cash is an issue.

    Dylan 4/22/04, Devon 6/24/06,Dorothy 9/13/07, Derek 12/19/09, Daniel 12/18/10, Daphne 2/24/12
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    Posting Addict Spacers's Avatar
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    1. If you continue to go over-budget, then you have to decide what needs adjusting -- the spending or the budget. I'm not familiar with those programs, but IMHO if your budget isn't working for you because of poor estimating, then it needs to be changed. But I also don't think one-time expenses should affect your monthly budget like that. For things like car registration or insurance that come once or twice a year, you can either amortize the expense over the year, i.e. set aside $50/month so you have the $600 you need next January, or don't include them at all in your monthly budget.

    2. I love the utilities balanced payment plan, so I'm not sideswiped by the occasional high bill. I pay the same amount for at least six months at a time. If that's not an option for you, then I would say whatever difference there is just stays a difference. Don't carry it over to the next month unless you believe an abnormally-low bill this month is going to result in an abnormallly-high bill next month, like if snow prevented reading your meter this month & you know the estimate is too low. In that situation, carry it forward, but don't do it regularly.

    3. The best way is to set up another asset account & transfer the amount to that asset when you purchase the gift card. This keeps your cash balance accurate. Then when you use the gift card, transfer those amounts from the gift card asset to the expense categories.

    4. I think the important thing is to be aware of how much money you have, and what you're spending it on, than the method you use to buy it. And really, a debit card *is* cash and so are gift cards, so I see no benefit to using one over the other. One thing we do sometimes, like when we're on vacation & whipping the card out like crazy, is to phone the bank every morning & write our balance on a post-it on the back of the debit card, and then subtract every purchase on the post-it as we make it. That way, we don't have to carry cash, but we're also very much aware of how much we have to spend, and what we're spending it on.

    5. Whatever period of time your bank will honor them. My bank is six months, so after six months, I'd add them back in. Also check to see if they might have cleared as an electronic transaction rather than as "a check." That's one thing that bugs me about Chase, if the check is scanned & submited electronically, like at Safeway, then it doesn't show up as a check in my account listing.
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    Quote Originally Posted by Spacers View Post
    1. If you continue to go over-budget, then you have to decide what needs adjusting -- the spending or the budget. I'm not familiar with those programs, but IMHO if your budget isn't working for you because of poor estimating, then it needs to be changed. But I also don't think one-time expenses should affect your monthly budget like that. For things like car registration or insurance that come once or twice a year, you can either amortize the expense over the year, i.e. set aside $50/month so you have the $600 you need next January, or don't include them at all in your monthly budget.
    When you set aside the $50/month do you put it in an envelope or co-mingle it with other savings? I have some big things to save for this year and don't know if it is just a "mental note" or literally cash in an envelope.

    I want the spending to change, but it's the meals out category. It adds up when you stop at Panera for a bowl of soup or take the family for yogurt and pizza. I'm budgeting X but spent 5X for the past 2 months.

    2. I love the utilities balanced payment plan, so I'm not sideswiped by the occasional high bill. I pay the same amount for at least six months at a time. If that's not an option for you, then I would say whatever difference there is just stays a difference. Don't carry it over to the next month unless you believe an abnormally-low bill this month is going to result in an abnormallly-high bill next month, like if snow prevented reading your meter this month & you know the estimate is too low. In that situation, carry it forward, but don't do it regularly.

    3. The best way is to set up another asset account & transfer the amount to that asset when you purchase the gift card. This keeps your cash balance accurate. Then when you use the gift card, transfer those amounts from the gift card asset to the expense categories.
    Is the asset account a literal bank account? I guess I'm pretty financially naive.

    4. I think the important thing is to be aware of how much money you have, and what you're spending it on, than the method you use to buy it. And really, a debit card *is* cash and so are gift cards, so I see no benefit to using one over the other. One thing we do sometimes, like when we're on vacation & whipping the card out like crazy, is to phone the bank every morning & write our balance on a post-it on the back of the debit card, and then subtract every purchase on the post-it as we make it. That way, we don't have to carry cash, but we're also very much aware of how much we have to spend, and what we're spending it on.
    Thanks! The Til Debt Do Us Part lady has them cut up both credit and debit cards. They have to go to the bank once a week and take out the cash for the week and put it in jars.

    5. Whatever period of time your bank will honor them. My bank is six months, so after six months, I'd add them back in. Also check to see if they might have cleared as an electronic transaction rather than as "a check." That's one thing that bugs me about Chase, if the check is scanned & submited electronically, like at Safeway, then it doesn't show up as a check in my account listing.
    Ugh! One of them is Chase. I wrote a check for DD2's school lunches. It hasn't cleared so I searched her backpack and the car for it. If someone else found it and "stole" it, fine, but it still would have cleared the bank.

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    Prolific Poster ftmom's Avatar
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    Quote Originally Posted by ethanwinfield View Post


    1. If I continue to go over-budget in one area, when should I adjust the budget?

    2. On variable expenses such as utilities, if I budget X and the amount is less than X, what do I do with the extra? Do I continue to carry over X as the monthly budget?

    3. If I buy a gift card when do I record it and where? When I buy it under the gifts category or when I use it under the category it was used in?

    4. I won't switch to cash only. Would it make sense to buy gift cards at the beginning of the month, so it's not cash, but not debit? I know where I will buy gas and groceries so that would be closer to cash than using debit.

    As a side note: How long do you deduct outstanding checks from your checking account? I have two from last September than never cleared.
    1. It sounds like you need to adjust your budget to a more reasonable level, but also work harder on adjusting your spending. I would recommend keeping a running tally of what you are spending in this area so that you can see exactly where the money is going. Then look for areas where you can cut, or cut down, you might be really surprised. This is actually where having cash works really well to keep you on budget, cause once it is gone, it is gone BTW, it is way more fun and more affordable to have a make your own pizza night at home than to go out, and you can do virtually all the prep the night before.

    2. I also love the equal payment plan for utilities. I find that they always charge me a little bit too much, so then I usually get a few months in the summer that I dont have to pay for. For the utilities I have where that is not an option I dont carry the money forward for a lower bill I just place it into savings, then if I have a higher bill than I budgeted for one month I can just take the extra from savings to cover it. I use an excel spread sheet to keep track of what I pay for all my bills monthly and then look it over and adjust my budget every 4-6 months.

    3. I dont use gift cards so Im not sure what you would do with that amount. I try to use cash, but my husband is really bad at sticking to it (never takes it with him, so he uses debit or credit). I do insist that anything spent gets written down though. We just write it all in one account book with a notation of what it was spent on (groceries, gas, etc.) and keep a running tally. I just keep one tally for all spending, but you could do a page for each 'category' if you wanted. This way you could use debit and still have a clear picture of what you are spending every month.

    4. See 3.

    And I have no idea about the checks as I dont even get them from the bank. My husband occasionally uses them, but we have never had this problem.
    Kyla
    Mom to Arianna (5), Conner (3) and Trent (my baby)

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    Posting Addict Spacers's Avatar
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    Quote Originally Posted by ethanwinfield View Post
    When you set aside the $50/month do you put it in an envelope or co-mingle it with other savings? I have some big things to save for this year and don't know if it is just a "mental note" or literally cash in an envelope.
    Whatever works better for you. If you're using a software program, it's really easy to set up sub-accounts, so your savings account balance shows $2000, but when you click into it, you see that $200 of that is for insurance and $200 is for registration. If you have a safe at home, and you can resist the urge to pilfer, then maybe envelopes is the way to go.

    Quote Originally Posted by ethanwinfield View Post
    I want the spending to change, but it's the meals out category. It adds up when you stop at Panera for a bowl of soup or take the family for yogurt and pizza. I'm budgeting X but spent 5X for the past 2 months.
    I'd go with the envelope option, and carry it in your purse. And write down on the envelope every penny you spend out of that money. You might also want to set two different budgets, one for your personal meals out, and another for family meals out. Also, if you *want* to eat out, but decide not to, write that down too. You might notice patterns in your desire to spend, and some people just like to see how much they didn't spend, kwim?

    Quote Originally Posted by ethanwinfield View Post
    Is the asset account a literal bank account? I guess I'm pretty financially naive.
    No, it's not a literal account, just in your financial software or a line on your spreadsheet.

    Quote Originally Posted by ethanwinfield View Post
    Thanks! The Til Debt Do Us Part lady has them cut up both credit and debit cards. They have to go to the bank once a week and take out the cash for the week and put it in jars.
    I can see how that can help some people. I wouldn't cut up my debit card, though. What if there's an emergency & you need more money on Sunday, or you have to purchase something online that you can't pay cash for locally? A better idea is to freeze it in a block of ice. It's available if you *really* need it, but not easily.

    Gosh, I didn't realize that I kind of miss not having clients to discuss this stuff with.
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    Posting Addict boilermaker's Avatar
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    1. If I continue to go over-budget in one area, when should I adjust the budget?
    Depends. Is the over spending in that area causing stress on your total budget? Can you afford to spend 5X what you wanted to on eating out? If so, adjust it. If not, change your habits. Why do you keep eating out so much if you don't have the money for it? Seems like your budget isn't doing you much good...and I suspect you aren't using your envelopes. We've done DR-- and I think the cash part is really required so that you see and feel the money going out.


    2. On variable expenses such as utilities, if I budget X and the amount is less than X, what do I do with the extra? Do I continue to carry over X as the monthly budget?

    Take the other advice and do the 6 month average...

    3. If I buy a gift card when do I record it and where? When I buy it under the gifts category or when I use it under the category it was used in?
    Why do you buy gift cards? I don't get it....as gifts? If so, one thing we really cut back on was our gift giving. We were buying things for people who didn't "need" things, but we wanted to be kind. Now we try really hard to handmake gifts/cards and it saves so much-- and I think they enjoy the thoughtfulness of it.

    4. I won't switch to cash only. Would it make sense to buy gift cards at the beginning of the month, so it's not cash, but not debit? I know where I will buy gas and groceries so that would be closer to cash than using debit.

    Why won't you switch to cash only? I see no compelling reason not to? Especially if your current system is not working (ie spending 5X budgeted amount on something...) Every Sunday I go to the grocery store and do the week's shopping. I know that I will then pull out whatever cash that gets us to our weekly allowance (groceries + cash= total for the week from debit)-- then we spend what is left over the course of the week. Sometimes we have money to go out on Saturday night, sometimes we don't.

    As a side note: How long do you deduct outstanding checks from your checking account? I have two from last September than never cleared.

    Most banks are 6 months.....

    Good luck. I think DR is a great-- we follow his plan and are pleased with the results. We live debt free (except for the house)-- but we'll have that paid off in 15 years or less. Oddly, it is kind of fun to rack up the savings. Find yourself some friends to do it with you-- that helps, I think. We joke with friends who will be the first to have a car with 200,000 miles (I think I'll win--I'm at 162,000-- woot!) It is just a different mindset...we spend a lot of time with friends, but doing lowkey activities at one another's houses instead of going out for drinks (and thus paying for food, drinks and babysitters....) I just think it is easier if you surround yourself with friends who have the same goals. GL!
    Audra
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    I haven't done read DR, but am familiar with the gist of it... I really think using cash is key (at least for a few months) to essentially learn the value of each dollar and really think before you spend. I can see not going 100% cash and using direct payment of utilities and stuff, but definitely use cash for the flex spending - groceries, entertainment, clothes, eating out (although imo this should be ditched altogether to really curb spending), etc.

    We go by the simple principle that if we don't have the money we don't buy it...

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    Quote Originally Posted by boilermaker View Post
    4. I won't switch to cash only. Would it make sense to buy gift cards at the beginning of the month, so it's not cash, but not debit? I know where I will buy gas and groceries so that would be closer to cash than using debit.

    Why won't you switch to cash only? I see no compelling reason not to? Especially if your current system is not working (ie spending 5X budgeted amount on something...) Every Sunday I go to the grocery store and do the week's shopping. I know that I will then pull out whatever cash that gets us to our weekly allowance (groceries + cash= total for the week from debit)-- then we spend what is left over the course of the week. Sometimes we have money to go out on Saturday night, sometimes we don't.
    Several reasons: I've had cash stolen from my purse and my entire purse stolen on more than one occasion. Also, SO is not on board with me. He asks if I have cash for the kids' lunches or a cup of coffee at 7-11. Lastly, lottery tickets are my weakness. I can be good at the grocery store if I use a debit card and not get cash back. But if I walk into the store with cash in hand, I will buy $5 in lottery tickets before I even make it to the produce section.

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